Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pandox AB (PNDXF, Financial) reported a profitable growth in the second quarter, with a 6% increase in both revenue and net operating income.
- The company has a strong and well-diversified hotel property portfolio consisting of 157 hotel properties with approximately 35,000 rooms in 11 countries and 90 cities.
- Pandox AB (PNDXF) has a high-quality project pipeline expected to accelerate organic earnings and value growth from 2024 to 2026 and beyond.
- The company has ambitious ESG targets, including a substantial climate transition program with high ROI.
- Pandox AB (PNDXF) has strong and positive lender relationships with low refinancing risk, and 71% of its net debt is hedged.
Negative Points
- The average outgoing interest on debt decreased to 4.1% in the second quarter, which is still relatively high.
- The company has SEK7.4 billion in debt maturing within one year, with 60% maturing in the fourth quarter, posing a refinancing challenge.
- New hotel supply in markets like Copenhagen, Helsinki, and Gothenburg could impact future performance.
- The company has not yet fully realized the expected SEK300 million in net operating profit from its ongoing projects.
- Pandox AB (PNDXF) faces competition from markets with strong performance, such as Southern Europe, where it has limited presence.
Q & A Highlights
Q: Could you highlight what you're seeing in your different markets regarding acquisitions and your comfort level in terms of net debt to EBITDA and loan to value?
A: The transaction market is back, with the UK and Ireland being the most active. We are comfortable with our current LTV of 46.2%, which is in the lower range of our policy. We aim to stay within our range but may increase slightly from 46% with potential acquisitions.
Q: Where are you seeing the most favorable demand-supply situation in your markets, and how do you expect this to change in the next one to two years?
A: We have seen new capacity in Copenhagen, Helsinki, and Gothenburg. We expect a moderate increase in new capacity through 2024-2026. Typically, it takes 1.5 to 2 years for new capacity to be absorbed in the market.
Q: Can you elaborate on the additional revenue generated by the European Championships in Germany in the second quarter?
A: The European Championships significantly boosted revenue, with the German market reporting a 90% increase in June, of which 75% is attributed to the event. This effect translates to a 5-6% increase for the quarter and 2-3% annually.
Q: Do you expect RevPAR growth in 2024 despite the favorable conditions in 2023?
A: Yes, we expect some RevPAR growth in 2024. The event calendar remains full, and we have less new capacity coming in. Our projects will also contribute to this growth.
Q: Has your cost of debt peaked, given the recent refinancing activities?
A: Yes, our cost of debt has peaked. Credit margins are coming down, and we are continuously refinancing. We expect the cost of debt to decrease further.
Q: Has the price level for acquisitions in the European hotel market been too elevated, or is it more about the type of assets available?
A: We are looking at both single assets and small portfolios. While some assets have not moved for a long time, there are interesting opportunities both price-wise and market-wise.
Q: How did Q2 performance compare to your expectations at the end of Q1?
A: Q2 performance met our expectations, with Germany showing strong results in June. The UK and Ireland also performed well.
Q: How much of the SEK300 million NOI increase from ongoing developments is already in the numbers by Q2?
A: Very little of the SEK300 million is in the numbers yet. Most of the projects will start contributing in the second half of the year.
Q: What yield on cost are you targeting for new developments or value-add opportunities?
A: We target a return of around 10-15% for developments within our existing portfolio. For acquisitions, we aim for healthy returns, typically around 9-10%.
Q: Are you considering expanding into new geographies, such as Southern Europe?
A: While we primarily focus on regions where we already operate, we are open to opportunities in neighboring countries. We have looked at markets like Spain but found them too expensive or late to enter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
